Ethiopia is considered as one of the most stable countries in Africa.
The Constitution of the country, adopted in 1995, provides for a multi-party political system.
Elections are held by universal suffrage every five years.
The FDRE has a parliamentarian form of government with a bicameral parliament which comprises the House of the Peoples’ Representatives (HPR) and the House of the Federation (HoF).
The House of the Peoples’ Representatives is the highest authority of the Federal Governm...

TRAINABLE LABOUR
• Ethiopia has a young, trainable and disciplined labour force.
• Private universities and colleges flourishing in Addis Ababa and regional cities.
• Over 30,000 university graduates per year, including business, management, economics, accounting, law and engineering graduates.
• Ample opportunity to meet the demand of skilled manpower in the technical and vocational field due to the expansion of Technical and Vocational Education and Training (TVET) college.
• Average priv...

1. STABLE ECONOMIC ENVIRONMENT
• Comprehensive development strategy resulting in strong economic growth.
• Stable macro-economic condition.
• Double digit economic growth averaging 11% per annum in the past 7 years.
• Generally, inflation managed at a single digit figure.
• Stable exchange rate.
• Government commitment to private sector.
• Safe and secure working and living environment, identified by the UN and the International Chamber of Commerce (ICC) as a key asset for investors in Et...

The following customs duty exemptions are provided for investors (both domestic and foreign) engaged in eligible new enterprises or expansion projects such as manufacturing, agriculture, agro-industries, generation, transmission and supply of electrical energy, Information and Communication Technology Development , hotel and tourism, construction contracting, education and training, hotel services, architectural and engineering works, technical testing and analysis, capital goods leasing and importation of LPG and bitumen.

100% exemption from the payment of customs duties and other taxes levied on imports is granted to all capital goods, such as plant, machinery and equipment and construction materials;

Spare parts worth up to 15% of the total value of the imported investment capital goods, provided that the goods are also exempt from the payment of customs duties;

An investor granted with a customs duty exemption will be allowed to import capital goods duty free within five years from the date of commissioning of a project;

An investor entitled to a duty-free privilege buys capital goods or construction materials from local manufacturing industries shall be refunded customs duty paid for raw materials or components used as in puts for the production of goods; and

Investment capital goods imported without the payment of custom duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges.

The value added tax (VAT) system, which came into effect on July 4th 2002, largely replaced the old business tax system of commodity and service taxes including the sales tax and the withholding tax. The VAT rate is 15% of the value of every taxable transaction by a registered person and all imports of goods and services other than those exempted. Taxable transactions which shall be charged with zero percent are: export of goods or services to the extent provided in the regulations. The rendering of transportation or other services directly connected with international transport of goods and other consumable technical supplies taken on board for consumption during international flights.

Excise tax is payable on a range consumer goods, whether locally produced or imported, e.g., alcohol, tobacco, salt, fuel, television sets, cars, carpets, and toys. Its rates vary from 10% on receivers, garments and textiles of any type and fabric to 100% on perfumes. vehicles above 1800 cc and alcoholic drinks. It is payable in addition to VAT.Turn over tax, under the total value of 500,000 Birr is applicable to pay 2 or 10 percent from annual taxable transactions on goods sold or services rendered locally.All income from domestic of foreign sources is taxable whether it is obtained as remuneration, profit, or gain, from employment, business activities or any activity which brings income to the beneficiary.

For depreciation allowance, assets are categorized into different classes. The categories and rates of depreciation are:1. Building and structure 5%2. Intangible assets 10%3. Computers, information systems, soft ware products and data storage equipment 25%4. All other business assets including automobiles, buses, and minibuses 20%Every investor has a tax obligation and is required to obtain a tax payer identification number (‘TIN”). An investor that will involve in taxable activity has also an obligation to register for VAT.

Taxable business income of companies is taxed at the rate of 30%. Other business taxpayers with business income ranging from ETB 1.801 to ETB 60.000 pay between 10 and 30%. Business income beyond ETB 60.000 is charged 35%.

Taxable Business Income Tax Rates

No.

Taxable Business Income Tax Rates

Tax Rate

Over Birr

To Birr

1

0

1800

Exempt threshold

2

1,801

7,800

10

3

7,801

16,800

15

4

16,801

28,200

20

5

28,801

42,600

25

6

42,601

60,000

30

7

Over 60,000

35

Source: Income Tax Proclamation No. 286/2002

Capital gain tax under Income Tax Proclamation No.286/2002 (Article 37) is payable on gains obtained from the transfer of buildings used for business, factory, or office purposes at 15% and shares of companies at 30%.An individual foreigner, who lives in Ethiopia for more than 183 days in a period of twelve calendar months, whether continuously or intermittently, is regarded as being resident of entire tax period and is taxed in accordance with the provisions on Income Tax Proclamation No. 286/2002 (Article 5.2)However, the following are excluded from the computation of taxable income in accordance with Article 13 of the Income Tax Proclamation No. 286/2002 and article 13 of the Regulations No. 78/2002:

Medical treatment

Transportation allowance

Hardship allowance

Reimbursement of travelling expenses incurred on duty

Per diem and travelling expenses on joining and completion of employment, provided that such payments are made pursuant to specific provisions of contract

Board members’ and board secretaries’ allowance; the income of persons employed for domestic duties;

The contribution of the employer and the employee to the retirement or provident fund and all forms of benefits contributed by employers that do not exceed 15% of monthly salary

Payments made to a person as compensation in relation to injuries suffered by that person or death of another person.Other direct taxes applicable are royalties (5%), income paid for services rendered outside of Ethiopia (10%), income from games of chance (15%), dividends (10%), income from rental of property (15%), and interest income (5%) and are payable at flat rates in accordance with Article 31-36 of the Income Tax Proclamation

The current Constitution of the Federal Democratic Republic of Ethiopia (FDRE) (proclaimed in 1995) has introduced many changes in the judicial system of Ethiopia. Among the major changes are: the establishment of an independent judiciary; provision for a three-layered federal and regional court system; provision for the extraordinary jurisdiction of the Federal Supreme Court to “review and correct any final decision of a basic error of law”, including a decision of the Federal Supreme Court; and the establishment of Federal and Regional Judicial Administration Councils for the appointment and dismissal of judges with a view to avoiding government interference.

Ethiopian law is essentially based on civil law, even though vestiges of the common law system are in evidence in some laws, notably the civil procedure code and the maritime code. Significantly, commercial and industrial laws are mainly influenced by the civil law.